Retirement
Planning
Defined Benefit
Retirement Plans are structured
to calculate the benefits using a defined formula that utilizes factors
including; the employment period and salary histories. Under this plan, all
investment portfolio options and investment risk, are controlled by the
employers. In contrast, Defined
Contribution Plans give more decision making leeway and choices to the
employee. Defined Contribution Plans can have the options of choosing between
different investment options such as stocks, mutual funds or other available
options. The employees are also free to decide whether to contribute and the
amounts that they wish to contribute through paycheck deductions. This plan can
also have cases where the employers contribute to the employee’s contribution
plan.
Defined Benefit Plans seem very appealing as they
have a form of permanence and guarantee to them compared to the Defined
Contribution plans. However, being a waitress, defined Benefit plans are not a
viable option. The nature of waitressing work also makes it hard to enroll in a
403(K) plan, since such plans are only available for the employees working for
tax-exempt public entities.
Previously having had little information about 401
(K) plans, it was easy to assume that being a waitress limited the available
options. However, this chapter clarifies this misconception, having provided
the knowledge that the only restrictions an employer can impose on the
employees joining a 401 (K) plan are; a minimum twenty-one year age
requirement, and attainment of at least a year-long working duration with a
minimum one thousand hours of service. With the information acquired on the
need for having a retirement plan, and having confirmed eligibility, it is
clear that joining 401(K) plan should be a priority. The 401(K) plan can provide a good supplement
for an existing Individual Retirement Account, to ensure financial security in
the retirement years.
Works cited:
Slesnick, Twila, and John C. Suttle. IRAs, 401 (k) s
& Other Retirement Plans: Strategies for Taking Your Money Out. Nolo, 2015.